A negative nest egg

The best reflection of an organization’s financial cushion is its unrestricted net assets — an accounting measure of how much money it has available to spend.

The NRA had negative $31.8 million on hand at the end of 2017, according to the form all nonprofits must file with the IRS. The group, which spent an average of $278.3 million a year, had a negative balance at the end of six of the previous 10 years.

This is very different from how two other prominent organizations operate. Consider the financial health of the American Civil Liberties Union, a civil rights group, and the AARP, which advocates on behalf of people who are 50 and older. Like the NRA’s main arm, they are 501(c)(4) social welfare groups that have a national reach and name recognition, and that engage in public policy advocacy.

The ACLU — although its budget is only a third of the NRA’s — had unrestricted net assets worth $140.2 million when 2017 came to a close, according to its tax form. And the AARP — whose annual budget is nearly five times that of the NRA — finished with a balance over $1.3 billion.

The NRA’s circumstances stand out by comparison not just with its peers but with all nonprofits. IRS data, including for fledgling startups, indicate fewer than 7% of American nonprofits ended 2017 with a negative balance.

How it happened

Despite years of thin finances, 2017’s negative $31.8 million balance in unrestricted net assets is notable as the organization’s 10-year low.

Given the growing push for gun control measures on the heels of more frequent and more deadly mass shootings, you might guess that declining membership dues could be to blame. But that’s not the full story.

The NRA does not release membership data. But it does by law have to make its cash flow a matter of public record. The group’s revenue has grown, but by about 0.7% a year over the past decade, not enough to keep up with annual inflation, which ranged between 1% and 2.3% over the past 10 years.

As a result, it looks like the organization got into this bind by spending beyond its means. Despite this relatively stagnant income, NRA expenditures have been growing by an average of 6.4% a year, maxing out at $412.7 million in 2016.

And all nonprofits, just like families and companies, run into trouble when they fail to live within their means.

The NRA is a 501(c)(4) membership organization but is also closely affiliated with a political action committee and several public charities. The affiliated charities, including the NRA Foundation, don’t face the financial issues that the NRA itself does.

Charity spending rules preclude the affiliated charities from just giving money to the NRA to shore up its funds. But, if the NRA runs out of options for cash, it can borrow from its affiliated foundation. This is precisely what the gun group did in 2017, suggesting that outside cash options were running thin and future options for getting cash may be even thinner.

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.